Which of the following actions best illustrates moral hazard?
A)Hannah knows she is a reckless driver and so she applies for automobile insurance.
B)A person is unwilling to buy a stock when she believes its price has an equal change of rising or falling $10.
C)Morgan dislikes losing $400 more than he likes winning $400.
D)When you rent a car, you treat it with less care than you would if it were your own.

Question

Quizplus · Accepted Answer

Moral hazard occurs when a person takes more risks because they know they are protected, as in the case of treating a rented car with less care because the consequences of damage are less personally significant.

Which of the Following Actions Best Illustrates Moral Hazard